Note 13. Restricted Common Stock, Stock Options, Restricted Stock Units (“RSUs”) and Warrants

Stock-Based Compensation:

The Company’s stock-based compensation expenses recognized during the three and nine months ended September 30, 2021 and 2020 were primarily attributable to selling, general and administrative expenses, which are included in the accompanying unaudited condensed interim consolidated statements of operations. During the three and nine months ended September 30, 2021, $0.6 million of stock-based compensation expense was recorded in cost of revenues, data center hosting. All stock-based compensation expense recognized during 2020 was recognized in selling, general and administrative expenses.

Riot Blockchain, Inc. and Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited)

The Company recognized stock-based compensation expense during the three and nine months ended September 30, 2021 and 2020 as follows:

Restricted Common Stock Awards:

During the nine months ended September 30, 2021, the Company granted performance-based and time-based restricted stock units (RSUs) to its directors, employees and advisors.

Performance-based RSUs

On August 12, 2021, the Compensation Committee of the Board of Directors of the Company approved a new performance-based restricted stock unit performance plan (the “Performance RSU Plan”) for all executive officers and eligible employees of the Company and its consolidated subsidiaries. In connection with the Performance RSU Plan, the Compensation Committee approved a form of performance-based restricted stock unit award agreement under the 2019 Equity Plan in relation to granting Performance RSUs. The Performance RSUs vest upon the successful completion of specified milestones related to added infrastructure capacity and also adjusted Earnings Before Income Taxes, Depreciation and Amortization (“EBITDA”) targets over a three-year performance period beginning in 2021 and ending on December 31, 2023. The value of the RSUs awarded is established as the fair market value of the Company’s common stock at the time of the grant. The Company recognizes compensation cost when achievement of the milestones and targets are probable, and recognizes the cost over the performance period. The Performance RSUs are settled in shares of the Company’s common stock upon vesting.

Riot Blockchain, Inc. and Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited)

A summary of the Company’s unvested performance-based restricted common stock units for the nine months ended September 30, 2021 is presented here:

During the nine months ended September 30, 2021, the Company awarded 3,925,000 performance-based restricted shares of common stock under the 2019 Equity Plan to employees, which are generally eligible to vest upon the successful completion of specified milestones related to added infrastructure capacity and also adjusted EBITDA targets over a three-year performance period beginning in 2021 and ending on December 31, 2023.

As of September 30, 2021, a total of 319,027 Performance RSU Awards for officers and employees were determined by the Compensation Committee to have vested for the successful completion of specified milestones.

The value of performance-based restricted common stock grants is measured based on their fair market value on the date of grant and amortized over their respective estimated implicit service periods. During the nine months ended September 30, 2021, the fair value of awards granted totaled $144.6 million and as of September 30, 2021, there was approximately $110.1 million of total unrecognized compensation cost related to restricted common stock awards, which is expected to be recognized over a remaining weighted-average vesting period of approximately 8.4 months.

Time-based RSUs

A summary of the Company’s unvested time-based restricted common stock units for the nine months ended September 30, 2021 is presented here:

During the nine months ended September 30, 2021, the Company awarded 173,737 restricted shares of time-based common stock under the 2019 Equity Plan to directors, employees and advisors, which are generally eligible to vest over a one-year period.

Riot Blockchain, Inc. and Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited)

The value of time-based restricted common stock grants is measured based on their fair market value on the date of grant and amortized over their respective vesting periods. During the nine months ended September 30, 2021, the fair value of awards granted totaled $5.8 million and as of September 30, 2021, there was approximately $2.6 million of total unrecognized compensation cost related to unvested time-based restricted common stock rights, which is expected to be recognized over a remaining weighted-average vesting period of approximately 5 months.

Other Common Stock Purchase Warrants:

During the three months ended September 30, 2021, 63,000 warrants were issued to XMS as partial payment for its advisory services in connection with the Whinstone Acquisition. The warrant entitles XMS to purchase from the Company up to 63,000 shares of the Company’s common stock, no par value per share, at a purchase price of $48.37 per share at any time through August 12, 2026. All warrants issued to prior investors in connection with previously disclosed private placement transactions in 2019 and 2017, had either been exercised or forfeited. The following is a summary of outstanding warrants for the nine months ended September 30, 2021: